Game over for hundreds of Zynga employees

In this June 26, 2012 file photo shows Zynga CEO Mark Pincus walks off the stage after an announcement of new games at Zynga headquarters in San Francisco. Battered shares of Zynga Inc. soared in after-hours trading Wednesday, Oct. 24, 2012, after the social gaming company posted stronger-than-expected revenue for the third quarter and said it will enter the gambling business. (AP Photo/Paul Sakuma, fIle)

June 3, 2013 6:47:34 PM PDT

by John Alston

SAN FRANCISCO --

Reality hit the world of virtual games Monday. Zynga, which makes games like Farmville, announced massive layoffs and said it's closing offices in Los Angeles, New York and Dallas.

As popular as online games might be, these are tough times for the people trying to make money off them. Zynga is expecting to lose between $29 and $39 million this quarter -- so something had to give.

Outside Zynga's fancy headquarters in the South of Market neighborhood, a sign reads "Play." But there wasn't much fun inside as employees were given boxes and told they were out of a job.

Programmers, artists, and other creative people behind some of Zynga's most popular online games were given the news, told to sign separation agreements and then sent on their way.

"You just do the best you can do and sometimes things happen outside of your control," Tony, a laid off programmer, said.

Zynga started strong with Facebook games like Farmville, but analysts now say many of those games are underperforming. And Zynga's core business of virtual interaction is unraveling.

"That business has declined. It's not growing for them anymore and they've really needed to shift their games toward mobile," says Bloomberg News's Doug Macmillan.

"They're not doing that as quickly as they should and they're not having as much success as they did in years past so they're scaling back their operation to have fewer people and fewer costs right now," Macmillan said.

Zynga is shedding 520 employees, or about 18 percent of its total workforce. There's no word on how many are from the San Francisco office.

CEO Mark Pincus spent $228 million to build headquarters that looked more like a giant play house. On Monday afternoon, another entrepreneur used chalk on the sidewalk outside Zynga to let laid off employees know of employment website Developer Auction.

Matt Greenburg, who works at Developer Auction, said: "We heard about what happened.at Zynga today and we just want to do what we can to help people out. If people are looking for a job, we're a targeted resource for developers."

As laid off employees were still leaving, Zynga had the chalk scrubbed off the sidewalk.

The layoffs and office closures are expected to save Zynga up to $80 million a year. To increase the bottom line even more, Zynga now appears to be trying to get into the online gambling business, where the money is not virtual.